Hemlock for economic students
(Putting effective demand in the long run and prices of production together)

Monday, September 26, 2011

Christina Romer gets it right on the deficit

Romer's column in the NYTimes, a few days ago, is certainly worth reading. She says among other things:

"Fiscal austerity, not more stimulus, is the answer. This argument makes me crazy. There’s simply no evidence that concern about the current deficit is a significant factor limiting consumer spending or business investment. And government borrowing rates are at record lows, suggesting that financial markets are not worried about the deficit, either... The best evidence shows that fiscal austerity depresses growth and raises unemployment in the near term. That’s the experience of countries like Greece, Portugal and Britain, which have embarked on drastic deficit reduction plans over the last two years. Cut the current deficit and you will raise unemployment, not lower it."

It's high time for Keynesians, of any sort, that may have some influence with the President to be for fiscal expansion.